Towards a European Security and Defence Fund

Faced with the double historical challenge of security and indebtedness, Europe has let its guard down and it now finds itself at a crossroads. Geopolitical tensions, terrorism and the migrant crisis come on top of economic difficulties and unemployment. In the absence of a federative project, citizens are disillusioned and sometimes swayed by the simplicity of the nationalist response.

Europe has let its guard down at the very time when the need for security and cyber security has never been more pressing

Europe must seize the initiative once more. At the heart of all these considerations are defence and currency, two inseparable pillars of sovereignty and security. We cannot help note that European defence budgets have fallen by almost 10% at the very time when the need for protection, information, security and cyber security has never been more pressing. During this period, these same expenses have increased by 9% in the US, 39% in India, 97% in Russia, 112% in Saudi Arabia and 167% in China.

How can we explain this gap? It is mainly due to the fact that a large part of Europe, caught up in a spiral of debt, has lost the resources and the margins needed to address growing threats and to finance the future at the same time. Restoring these shared margins through political will and financial measures is urgently needed.

A European Security and Defence Fund (ESDF) to address growing threats and control the debt burden

That is why I am proposing a European Security and Defence Fund (ESDF). Its first goal would be to restore vision and margins for manoeuvre in the euro zone by taking on all or part of the accumulated debts contracted by the Member States for the purposes of defence since the introduction of the euro. Based on a similar principle to the European Stability Mechanism, it would issue very long-term bonds, of around 50 years, at the lowest cost, guaranteed through a transfer of fiscal resources (2 annual VAT points per country). Once past defence expenditure has been lodged with the ESDF, France’s debt would fall from 91% to 61% of GDP. Germany’s would be automatically reduced to 55%. The convergence, which is currently unattainable, would once again be within reach.

Reconciling security needs and sovereignty of Members States

So how would we then finance our shared security efforts for the decades to come? Let’s consider a few options. In my view around half of this expenditure, particularly related to national sovereignty (nuclear, specific external operations, protection of national interests, etc.) should remain under the control – and sole responsibility – of the Member States. The other half, concerning the preservation of shared European interests (border control, coast guards, shared forces and means of projection, cyber security of European data, infrastructure, etc.) should, I think, be pooled and under the authority of the common mechanism of the ESDF, which would take care of their annual funding. This would enable us to achieve defence budgets of at least 2 GDP points in each euro zone country (compared to 1.2% today), which seems the minimum needed in a Europe which finds itself increasingly alone as it faces the future. With this system, each Member State would benefit compared to the current situation. For each Member State, the two annual VAT points would represent a lower cost than the sum of the interest on their defence debt and half of their annual defence budget at 2 GDP points. This innovative mechanism has the advantage of effectively reconciling security needs, and also the sovereignty of Member States, with the need for budget discipline.

A suitable legal and institutional framework for this already exists. That is the Treaty of Lisbon which, since 2009, has encouraged Member States to implement permanent structured cooperation in the area of defence. And we must remember that, since the 1950s, the Founding Fathers of Europe and their successors have tried to establish a plan for shared armed forces, such as the EDC (“European Defence Community”).

Encourage investors and restore confidence among citizens

Currency and defence have always been two sides of the same coin. With Europe in breakdown, the creation of a European Security and Defence Fund would, I firmly believe, allow us to restore meaning to political action, to encourage investors and restore confidence among our fellow citizens, disoriented by the apparent lack of a European response to current challenges, both in terms of security and finances.

Faced with the double historical challenge of security and indebtedness, Europe has let its guard down and it now finds itself at a crossroads. Geopolitical tensions, terrorism and the migrant crisis come on top of economic difficulties and unemployment. In the absence of a federative project, citizens are disillusioned and sometimes swayed by the simplicity of the nationalist response.
Europe has let its guard down at the very time when the need for security and cyber security has never been more pressing
Europe must seize the initiative once more. At the heart of all these considerations are defence and currency, two inseparable pillars of sovereignty and security. We cannot help note that European defence budgets have fallen by almost 10% at the very time when the need for protection, information, security and cyber security has never been more pressing. During this period, these same expenses have increased by 9% in the US, 39% in India, 97% in Russia, 112% in Saudi Arabia and 167% in China.
How can we explain this gap? It is mainly due to the fact that a large part of Europe, caught up in a spiral of debt, has lost the resources and the margins needed to address growing threats and to finance the future at the same time. Restoring these shared margins through political will and financial measures is urgently needed.
A European Security and Defence Fund (ESDF) to address growing threats and control the debt burden
That is why I am proposing a European Security and Defence Fund (ESDF). Its first goal would be to restore vision and margins for manoeuvre in the euro zone by taking on all or part of the accumulated debts contracted by the Member States for the purposes of defence since the introduction of the euro. Based on a similar principle to the European Stability Mechanism, it would issue very long-term bonds, of around 50 years, at the lowest cost, guaranteed through a transfer of fiscal resources (2 annual VAT points per country). Once past defence expenditure has been lodged with the ESDF, France's debt would fall from 91% to 61% of GDP. Germany's would be automatically reduced to 55%. The convergence, which is currently unattainable, would once again be within reach.
Reconciling security needs and sovereignty of Members States
So how would we then finance our shared security efforts for the decades to come? Let's consider a few options. In my view around half of this expenditure, particularly related to national sovereignty (nuclear, specific external operations, protection of national interests, etc.) should remain under the control - and sole responsibility - of the Member States. The other half, concerning the preservation of shared European interests (border control, coast guards, shared forces and means of projection, cyber security of European data, infrastructure, etc.) should, I think, be pooled and under the authority of the common mechanism of the ESDF, which would take care of their annual funding. This would enable us to achieve defence budgets of at least 2 GDP points in each euro zone country (compared to 1.2% today), which seems the minimum needed in a Europe which finds itself increasingly alone as it faces the future. With this system, each Member State would benefit compared to the current situation. For each Member State, the two annual VAT points would represent a lower cost than the sum of the interest on their defence debt and half of their annual defence budget at 2 GDP points. This innovative mechanism has the advantage of effectively reconciling security needs, and also the sovereignty of Member States, with the need for budget discipline.
A suitable legal and institutional framework for this already exists. That is the Treaty of Lisbon which, since 2009, has encouraged Member States to implement permanent structured cooperation in the area of defence. And we must remember that, since the 1950s, the Founding Fathers of Europe and their successors have tried to establish a plan for shared armed forces, such as the EDC ("European Defence Community").
Encourage investors and restore confidence among citizens
Currency and defence have always been two sides of the same coin. With Europe in breakdown, the creation of a European Security and Defence Fund would, I firmly believe, allow us to restore meaning to political action, to encourage investors and restore confidence among our fellow citizens, disoriented by the apparent lack of a European response to current challenges, both in terms of security and finances.